I’m still unconvinced Auckland has found the floor in the current environment. Nor do I believe for a moment, the recent slash to the OCR will change that.
They say it can’t be done, but here at Wealth Morning we attempt to broadly forecast what’s coming next for the economy.
Once you understand the underlying forces which drive the economy, you will have access to insight that few people ever attain.
It has less to do with the movement of central banks or the stock market. Or movements in interest rates, inflation, or some other mechanism.
It’s based on the real estate market.
What happens in the real estate market underlies the economic cycle. And the cycle simply continues to repeat.
Property Markets History
A man by the name of Homer Hoyt identified the repetition of this real estate cycle in a book written back in 1933, called ‘One Hundred Years of Land Values in Chicago.’
A study of history as Homer Hoyt did it, with a focus on land values, proved the economy moved in a very clear sequence of roughly 18 to 20 year cycles.
It’s directly related to land price and it repeats regardless of government policies and the type of government in power.
And nothing has changed since Homer Hoyt wrote the book in 1933. The real estate cycle simply keeps reaffirming itself.
The financial reforms initiated after the global financial crisis, have only guaranteed yet another real estate cycle, as that crisis was not financial in nature.
It was a land crisis
And whilst the underlying cause of the cycle is ignored, the real estate cycle must repeat.
If you want to make money — whatever route you choose — the road to profit is paved with both opportunity and crisis. No risk, no reward.
As investors, it’s easy to become overwhelmed with all of the issues and trends affecting our wealth. Some good. Some bad. It’s critical to determine which is which.
As I write this, it’s clear to anyone trying to sell a home that the boom days are gone. The bubble will probably continue to suck slowly inwards rather than burst without a parachute.
Like me, you’re probably tired of hearing that we’re overdue for a house price correction. But this time, things are different.
Central bankers are often revered as the captains at the helm of the global economy. It’s as if their actions dictate the trajectory of the future
These signs may just be the prelude to a seismic shift that’s beginning to rattle the economy, both here in New Zealand and around the world.
New technology, better ways of doing things, all feed into a rising land price. And then people start to speculate in it. And there’s your cycle.
You never get the full story in the news. You read about Auckland property values easing off. A decline in confidence. Then you put your ear to the street.
There are three important decisions in life: What you do…with whom you do it…and where you do it. What. Who. Where. Keep it simple.
Claptrap comes in many guises and disguises. Sometimes, it is based on inconsequential error. Sometimes, it is just bad judgment.
Keynes’ prediction never came to pass. We still work 40 hours a week on average. And toil harder than ever before. Those gains in productivity are real. But where did they go?
In New Zealand, we have one of the largest fishing zones in the world. 4.1 million square kilometres. And a low population base. This provides a competitive advantage.